Time to come in from the cold.

Securitisation, or the packaging and selling of debt instruments, has been a dirty word in Europe since the global financial crisis. But policy makers from Yves Mersch at the European Central Bank to Andrew Haldane at the Bank of England are increasingly talking of the need to revive securitisation in Europe. That is encouraging.

The market seems unlikely to boom any time soon. Regulatory hurdles are much higher than before the crisis, and end-demand for consumer and corporate borrowing in Europe remains uncertain given the anaemic growth outlook.

Still, any progress on this front could help spur more lending in Europe, especially as banks continue to look to shed assets to clear higher regulatory hurdles. And European securitisation deals issued before the crisis have held up remarkably well, showing the practice has merit.

Excluding covered bonds, where defaults have been zero, only €41.5 billion of the €1.7 trillion of European securitisations rated by Standard & Poor's by mid-2007 have defaulted, the ratings firm notes. Losses on residential mortgage-backed securities, the largest part of the market, have been just 0.1%. By contrast, the structured-finance default rate for US deals since mid-2007 is 18.4%, S&P notes.

The turmoil caused by the eurozone debt crisis and the subsequent deep European recession and soaring unemployment make these figures all the more impressive, and show that securitisation can be a valuable tool. Yet while US issuance of asset-backed securities has bounced back post-crisis, in Europe it remains moribund: just €50.7 billion of securities were sold to investors in the first three quarters of 2013, 12% less than in the same period of 2012, according to industry body Sifma.

A crucial issue is whether there are sufficient buyers for European securitisations. Pre-crisis, a large chunk of issuance was bought by banks or by vehicles set up by banks. When the crisis hit, their funding sources dried up and they were forced to sell, whether the assets were good or not: all securitisations were tarred with the same brush.

There may be some demand from banks in the future since some high-quality securitisations will count as liquid assets that banks are required to hold. But they are being encouraged far more to buy other securities such as covered bonds. The market needs a new, broader investor base.

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Securitisation is also unlikely to be a silver bullet for policy makers' latest hot-button issue: funding for small- and medium-size enterprises. While consumer loans are well-suited for securitisation, corporate loans tend to be more idiosyncratic, particularly for small businesses.

And there are still questions around whether the economics of securitisation will help those parts of Europe that might benefit most. In Spain, for instance, the price of senior slices of residential mortgage-backed securities is high compared with benchmarks, making such deals uneconomic, JP Morgan notes.

These hurdles need to be overcome; progress may well be slow. But the first step is to tone down the demonisation of securitisation. Rehabilitation by policy makers is overdue but welcome.